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NetApp thin provisions income in Q1

Cultivated surge planned

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NetApp's earnings climbed 11 per cent during its fiscal first quarter 2009, but margins were thin due to growing interest in low-end storage and an investment "surge" that the company expects to pay off in the second half of the year.

"Our new fiscal year got off to a good start, and our efforts to increase awareness and sales capacity in order to secure new customers are delivering results," said CEO Dan Warmenhoven in a statement.

Revenues were $869m, an increase of 26 per cent compared to $689m for the same period last year.

Net income was $38m, compared to $34m year-over-year.

Product sales totaled about $548m, services brought in about $177m, and revenues from software licensing and maintenance were $144m.

Warmenhoven said in a conference call today that the company is seeing more strength in low-end storage systems — but the gear is less profitable because it typically ships with less software and options.

Enterprise spending has remained consistent due to big firms looking for new kit to save costs, he said.

Mid-tier array sales, however, were weak in Q1. NetApp expects the numbers to pick up when sales of its new FAS3100 arrays are better reflected in the fiscal second quarter.

The company spent about $303m on marketing, $125m on research and development, and $50m general and administrative costs.

NetApp said its marketing and hiring costs have gone through a "surge" recently in order to "cultivate" current accounts and build greater brand recognition.

"We feel it will pay off and we'll come roaring right back," Warmenhoven said.

NetApp estimates revenue for the second quarter 2009 will be between $910m and $940m.

In a separate announcement, NetApp said it's authorized $1bn for stock repurchases. ®